I recently came across the first class certification ruling I’ve seen in an insurance case since the Supreme Court decided Wal-Mart (see my prior blog post).  The court strongly applied the new standard for commonality and found a lack of commonality, even though the same judge had previously found most of the class certification elements (except for adequacy of representation) satisfied in a very similar case prior to Wal-Mart.  So far, so good – this federal district court applied Wal-Mart as I expected it to be applied in insurance cases, and denied certification.

In Corwin v. Lawyers Title Insurance Company, 2011 U.S. Dist. LEXIS 84232 (E.D. Mich. Aug. 1, 2011), the plaintiff alleged that she was overcharged for a title insurance policy when she bought it as part of a “short sale” transaction (owing more than her property was worth, she sold it to the bank).  She claimed, for herself and a putative class of Michigan property owners, that under rate manuals she was entitled to a discounted rate because she had bought a prior policy on the same property.  Id. at *1-4.  She claimed that, although she had not presented evidence of the prior policy, the insurer had the burden of determining whether prior insurance existed.  She claimed the insurer could do this through a title search.  Id. at *5.  This kind of issue is fairly common in title insurance class actions – see my prior posts regarding a Sixth Circuit decision and a Western District of Washington decision in similar cases.

Judge Dawson, who decided this case, had previously found all of the class certification elements, except for adequacy of representation by the named plaintiff, were satisfied in Hoving v. Lawyers Title Insurance Company, 256 F.R.D. 555 (E.D. Mich. 2009).  He changed his mind here, though, based substantially on Wal-Mart:

[T]he Court [in Wal-Mart] quoted this language: “What matters to class certification . . . is not the raising of common ‘questions’—even in droves—but, rather the capacity of a classwide proceeding to generate common answers apt to drive the resolution of the litigation. Dissimilarities within the proposed class are what have the potential to impede the generation of common answers.”

In this case, the plaintiff’s proposed class consists of all individuals who purchased title insurance during specified time periods and were charged the basic rate. No absent class member can recover under the unjust enrichment theory, however, unless he or she can establish that there was a previous title policy issued on the specific property in question. Such proof is uniquely individualized; it cannot be established on a classwide basis. Therefore, instead of liability being established “in one stroke,” it would take an assessment of each transaction to determine if the absent class member qualified for the discount rate. Finding that the defendant failed to make a proper inquiry would not establish that the title company was unjustly enriched by charging the basic rate absent proof that the seller’s property was insured previously. In order to make that determination, each transaction would have to be examined. As a consequence, the plaintiff cannot satisfy the requirement of Rule 23(a)(2) because, although there are questions common to the absent class members and the plaintiff that must be decided before liability is established, the critical inquiry without which liability cannot attach requires individualized determination.

 Id. at *16-18 (citation omitted; emphasis added).

This decision highlights how Wal-Mart has fundamentally changed the law on class certification.  If there is a key issue that requires individual determination, the basic requirement of commonality is not satisfied, let alone predominance (which the court here also found was not satisfied).